Independence Day in Israel is always marked by a news media outpouring of reviews of the year. It is a reliably upbeat affair replete with heartening economic statistics and the good deeds of upstanding citizens. The 62nd anniversary of Israel’s founding this past April was in many ways no different. Certainly there was much to celebrate. Compared with previous years, this one was relatively quiet. Only two Israeli civilians (and one foreign worker) were killed by terrorists, and, thanks to Israel’s incursion—amid international condemnation—into the Gaza Strip little more than a year earlier, residents in nearby communities were no longer forced to sleep in shelters to avoid the steady rain of rockets once launched by Hamas militants. The northern Galilee was teeming with tourists, the cafés and cinemas were packed with customers, and many establishments no longer bothered to employ security guards to check entering patrons.

The economy has been growing briskly for years; Israel barely lost a step in the global financial crisis, handily outperforming the United States and Europe. On a pound-per-pound basis, Israel is hard to match as a center of innovation and creativity, as the current bestseller about the country, 

, well illustrates. (See the article by the book’s authors, Dan Senor and Saul Singer, on p. 62.) Israel ranks third in the world in the output of scientific articles per capita, and Israeli companies are the number-one foreign presence on America’s technology-dominated

NASDAQ stock exchange. Thank the Israelis for USB plugs and countless other indispensable pieces of modern technology. Even their cows are winners, outproducing American and European animals by wide margins.

Yet for all this, Independence Day in Israel was tinged by a deep sense of unease. While the newspaper supplements maintained their upbeat tradition, darker stories dominated the news. Banner headlines proclaimed yet another political scandal, this time involving former prime minister Ehud Olmert and a former mayor of Jerusalem, as well as more than a dozen government officials and leading members of Israel’s business community. The bribery scandal—involving allegations that hundreds of thousands of dollars changed hands in connection with a real estate project in the 1990s—is the largest in Israeli history, and it came on the heels of other revelations that have caught up a foreign minister, a former treasury minister, and even a former president. This new wave of corruption was for skeptical Israelis an additional illustration that something fundamental is wrong with the entire political system.

Ultimately, though, the unease has deeper roots. This year marks the 150th anniversary of the birth of Theodor Herzl, the founder of the Zionist movement. Herzl embraced the idea that the Jews’ assimilation into European societies would bring an end to anti-Semitism until the Dreyfus affair in late-19th-century France persuaded him that threats to Jews’ security would end only if they established their own state. Yet 62 years after the birth of Israel, threats still abound. Since the collapse of the Oslo peace process at the Camp David summit in 2000, more than a thousand Israelis and thousands of Palestinians have been killed. Anti-Semitism is on the rise worldwide, in some cases as a result of Israel’s own policies, such as Operation Cast Lead, the Gaza incursion in the winter of 2008–09 that stopped the Hamas rocket attacks, and the bungled commando attack on Gaza-bound Turkish supply ships this past May. Rather than provide security for Jews, it appears that Israel has occasionally produced the opposite result.

And now the threat of a nuclear-armed Iran looms. What appears to the United States to be a strategic problem, observes Israeli defense minister Ehud Barak, is an existential threat for Israelis, many of whom acutely remember huddling in sealed rooms with gas masks pulled over their heads when Saddam Hussein’s Iraq launched missile strikes at Israel during the first Gulf War in 1991. Nine years after that, during the second intifada, a wave of suicide bombers attacking cafés and buses in the heart of Jerusalem and Tel Aviv led Israelis to the chilling conclusion that peace was unattainable, or at least very far away. “There is no one to talk to,” they said—no effective leadership on the Arab side willing or able to discuss peace seriously.

That gloomy conclusion has been reinforced by Hezbollah’s launching of thousands of missiles and rockets from Lebanon into Israel’s northern towns and by the rocket attacks of the Gaza-based Hamas, suppressed for the time being, against the country’s southern communities. Both groups are backed by Iranian president Mahmoud Ahmadinejad, who does not hide his intention “to wipe the Zionist entity off the map.”

Disappointment with the peace process, existential anxieties, and a sense of uncertainty about the future have wrought major changes in Israel’s political life. After the failure of Camp David and the outbreak of the second intifada, the left-of-center political parties began a sharp decline. The presence of the once powerful Labor Party was reduced to only 13 of the Knesset’s 120 seats in the 2009 elections, and that of the Meretz Party, to Labor’s left, to just three. Liberal and left-wing non-parliamentary movements such as Peace Now are virtually silent, and civil and human rights activists commonly face accusations of treason.

Israel's left-of-center political parties have shrunk, and its civil and human rights activists are often accused of treason.

The nationalist-religious right wing has enjoyed a renaissance. The parties in this camp hold a majority in the Knesset, their think tanks (such as the Shalem Center in Jerusalem and the Jerusalem Center for Public Affairs) dictate the public discourse, their worldview prevails in the mass media, and their spokespersons dominate cyberspace. This Weltanschauung is based on distrust of non-Jews, a conviction that “the entire world is against us,” and a deep belief that only power will determine the outcome of the Israeli-Arab conflict. Since the elections last year, more attempts have been made to limit the rights of Israeli Arabs and even to expel them from Israel, restrict the operations of civil rights organizations, limit freedom of expression, and curtail judicial review by the Supreme Court. Jewish settlements in the West Bank have been steadily thickening.

Israeli politics are also being reshaped by new demographic realities. Perhaps a million immigrants from the former Soviet Union arrived during the 1990s, and they have tended to adopt a nationalist view of the world. From their native land they have brought the attitudes of homo sovieticus and translated them into an Israeli context: hatred of the other (i.e., Arabs), insensitivity to human rights, and a preference for strong leaders over the complexities of parliamentary democracy. They don’t understand how a state that can be crossed in half an hour by car would be willing even to talk about relinquishing territories to its seemingly perpetual enemy. Last year, many of them voted for the radical-right party of Avigdor Lieberman, Israel Is Our Home. More than half of the 15 seats this party won were the products of the Russian-speaking community’s votes.

Add to these immigrants the ever-growing ranks of Orthodox and ultra-Orthodox Jews, whose birthrate is almost three times that of their more secular-minded compatriots. Once mostly in the moderate camp, they have become the avant-garde of the settlers’ movement and the leading force in the occupied territories, believing that “the Land of Israel” is a divine gift bestowed on the Jewish people and that the Jews are forbidden to transfer any part of it to others.

The other major group on the right consists of Jews with origins in Morocco and Middle Eastern countries outside Israel, many of whom are followers of Rabbi Ovadia Yosef, the absolute leader of the Shas party. It too has moved to the right as many of its constituents, encouraged by government subsidies, have moved to settlements in the West Bank.

Finally, there are the nearly one million young people, the so-called millennials, who voted for the first or second time in 2009. Their political socialization occurred during the first decade of the century, when the peace process collapsed and with it the belief that peace is possible at all. At the same time, they came of age without any memory of Israel inside its pre-1967 borders and find it difficult to conceive of returning to them. They tend to believe, with Moshe Ya’alon, a former chief of staff of the Israel Defense Forces (IDF) who is now a superhawkish member of the government’s inner cabinet, that “peace will only come in the next generation.” Ya’alon says, “We are a society at war. Our sword must remain unsheathed.”

Even more serious than the move to the right is the widespread disengagement from politics among the young. This sort of alienation is not unique to Israel, but it is qualitatively different there, where the disaffected see a system that is not merely flawed but has failed to deliver the goods for the last 43 years—a real end to the Six-Day War and a resolution of the Arab-Israeli conflict. Disaffected Israelis see politicians who serve their own interests first, then those of narrow interest groups. Politics to them “has become something essentially negative and revolting,” says political scientist Tamar Hermann of the Israeli Democracy Institute in Jerusalem. “What is left is to flee from public affairs to their private gardens.”

The disenchantment is partly a byproduct of the structure of Israel’s electoral system—a political scientist’s dream, but one that has tied Israel in knots for decades. Under Israel’s proportional voting scheme, voters do not cast ballots for a specific local representative but for a national political party. (Voters have little role in selecting the parties’ candidates: Some parties hold primaries, in which turnout is generally light, while others, such as Shas and Israel Is Our Home, have the leader simply choose the parliamentary list himself.) Parties are awarded seats in the Knesset according to the proportion of votes they receive in the national tally. Even the tiniest group can hope to win seats by going it alone, with the result that more than two dozen parties compete in any given election. About half succeed. No party in the country’s history has ever won enough seats to form a government on its own, and it is the rare government that lasts more than two years.

Last year, Prime Minister Benjamin Netanyahu’s conservative Likud Party won only 27 of the 120 Knesset seats, finishing second to the more centrist Kadima, which won 28. The government Netanyahu formed is a coalition of six parties, including some, such as Labor and Shas, that have diametrically opposed views on the central issue of how to resolve the Israeli-Arab conflict. Other coalition members are chiefly interested in advancing their parochial interests. For example, the ultra-Orthodox United Torah Judaism, with five seats, is bent on strengthening its independent religious schools and safeguarding privileges, such as the exemption of religious students from mandatory military service. In such a coalition, sectarian interests often trump national needs, the coalition partners compete on a daily basis, and the prime minister is reduced to the role of a balancer, whose main task is merely to preserve the coalition.

Netanyahu, who previously served as prime minister from 1996 to ’99, has gone to extraordinary lengths to ensure the stability of his government. The price is significant. His administration has 30 full and deputy ministers, more than any in the country’s history, and many of them lack specific portfolios. While a quarter of the Knesset’s members now enjoy the power and perks of office, it is difficult to administer such a government efficiently or lead it effectively.

During the 1990s, similar frustrations spurred a reform drive that was blunted by the parties’ unwillingness to relinquish any power. The result was a complex, unworkable system, with the Knesset elected as before but the prime minister chosen by the people in direct elections. (Netanyahu, who had supported reform, was the victor.) The result was the polar opposite of what was intended: Larger parties were reduced in size while the number of small parties increased, making the governing coalition even more unstable. No wonder that in 2001 the Knesset voted to restore the former system. Since then, there has been little interest in discussing electoral changes advocated by academics and reformers.

A more modest reform may still be possible. There is strong public support for the idea of dividing Israel into 20 or 30 districts, which would each elect several members. In this way, citizens would know who their representatives were and the legislators would be directly accountable to the voters. So far, however, the Knesset has been noticeably unenthusiastic about the idea, for the obvious reason that it would limit members’ freedom of action.

After decades in which Israeli politicians were national heroes and role models for the young, the nation faces a severe leadership drought. Amid the prevailing atmosphere of futility and disgust, many Israelis do not even recognize their elected officials. The average Israeli mother would have nightmares if one of her children declared a desire to pursue politics as a vocation. Political parties across the spectrum have turned to celebrities to bear the party standard at the polls—some with substantive agendas, such as Labor’s Shelly Yachimovich, a radio commentator, but many others who are simply attractive media personalities with no political background or agenda whatsoever. The Americanization of Israeli politics in the 1990s, which introduced political consultants and the media circus, has been followed by its Italianization. How long will it be before Israeli politicians follow the example of Prime Minister Silvio Berlusconi by choosing beauty queens for their party lists?

The leadership vacuum has also drawn retired military officers into politics. In the past, popular commanders such as Moshe Dayan and Ariel Sharon entered the political arena after winning wars; now it is almost a routine career path. Three of Netanyahu’s Likud cabinet ministers are former generals, and many more retired officers have appeared on party lists or currently serve in high civilian posts. Critics link this influx with what they see as Israel’s increasing militarization and right-wing direction, but this is a simplistic view. Some of Israel’s greatest peacemakers have been generals—Prime Minister Yitzhak Rabin, a former chief of staff of the IDF, signed the 1994 peace treaty with Jordan and the 1993 Oslo Peace Accords with the Palestinians—and today’s generals are a politically diverse lot. Yet the critics are correct to point out that the vision of many of these former officers tends to be too narrow. Left to them, security matters become not just the most important issue but the sole issue, and they often see Israel’s international relations mainly through a military prism. The uproar over Israel’s interception of relief ships bound for Gaza is only the most recent illustration of the fact that scoring tactical victories can be counterproductive when the struggle is essentially about securing international political legitimacy.

What remains remarkable is that Israel, despite its travails and the fact that it has never known a single day of peace, enduring a full-scale military confrontation in every decade of its existence, has not lost its democratic nature and ethos. Its public life remains lively, teeming with activist organizations and civic groups. There is freedom of speech, and the news media are strong and biting. An independent, aggressive judiciary has overruled Knesset legislation it judged anti-democratic and has protected the rights of minorities—for example, by ruling in favor of Palestinian farmers who objected to the positioning of the security fence between Israel and the West Bank because it cut them off from their land. These are noteworthy achievements in a society engaged in a seemingly intractable war.

Still, the never-ending conflict has exacted a high price. It absorbs Israel’s material and mental resources. Anxiety and testiness increasingly permeate Israeli society, and the kind of aggressiveness once seen on the country’s notorious roadways is now visible everywhere in daily life, including on the floor of the Knesset, where members’ tongues are sharp and even injurious to a degree that makes America’s polarized atmosphere seem tame.

The social solidarity that was a hallmark of Israel through its formative years is sadly diminished today. All Israelis were shocked in 1995 when a right-wing assassin infuriated by the Oslo agreement killed Rabin, but the hoped-for sobering effect in the wake of Rabin’s death never came. Historian Emmanuel Sivan of the Hebrew University of Jerusalem has compared contemporary Israel to France during the Algerian War of 1954–62. France’s bloody occupation of its rebellious colony, Sivan says, bred social and political schisms within France that its political system simply could not contain. The solution was not just to change the system, as Charles de Gaulle did when he became prime minister in 1958, but to eliminate the key source of division: the occupation. It is a lesson Israel must heed.

Herein lies Israel’s Catch-22: In order to reform the political system, the three major parties (Likud, Kadima, and Labor) will need to join forces. Yet before they can do that, they must come to an agreement on how to resolve the conflict with the Palestinians. But the nature of the political system makes such consensus very difficult to achieve. Most Israelis still believe the nation will muddle through, while others believe new leadership will emerge and break the gridlock. An increasing number, however, argue, as former foreign minister Shlomo Ben-Ami does, that only a friendly outside power, namely the United States, can assist Israel by pushing it to resolve the conflict.

If the last decade of the 20th century was one of optimism about the prospects for peace, the first decade of the current century was one of disillusionment and despair, both of achieving peace and of reforming Israel’s ailing political system. Will the Israel of the new decade be a repeat of the past dark decade, or of the hopeful one that preceded it? The answer to this question depends to a large extent on the resolution of this Catch-22.

 is the Abraham S. and Jack Kay Chair in Israel Studies and director of the Joseph and Alma Gildenhorn Institute for Israel Studies at the University of Maryland. A political adviser to the late prime minister Yitzhak Rabin and former editor in chief of Israel’s daily newspaper Davar, he is the author most recently of Generals in the

 Cabinet Room: How the Military Shapes Israeli Policy (2006).

3257763311_79f44a4053_b.jpg

Israelis are increasingly unhappy with a political system that seems to deliver nothing but strife and division.

Yoram Peri